SHANGHAI/NEW YORK, April 13 (Reuters) - Palm Inc PALM.O
may be scooped up by an Asian company with enough cash and
manufacturing muscle to turn around the struggling smartphone
maker, but analysts warn a deal could prove too rich for any
buyer at current prices.

Huawei Technologies Co Ltd [HWT.UL] became on Tuesday the
latest name to surface as a possible bidder for Palm, whose
phones have steadily lost customers to the iPhone and
BlackBerry. Two months ago, Palm reached out to Huawei's
bankers regarding a possible deal, although talks have not
moved forward, according to a source.

Palm declined to comment, but another source said this week
the company has hired bankers to explore several options,
including a sale of the company [ID:nLDE63C01S].

Huawei, in a statement, also declined to comment on a
merger, but said it is "always open" to opportunities that will
enhance its business development.

If Palm fits that bill, Huawei could face competition from
a handful of other companies in Asia. Various reports suggest
inquiries in the region already include a PC maker, a handset
developer and a telecommunications provider.

Several North American companies -- from computer maker
Dell Inc DELL.O to Blackberry maker Research in Motion Ltd
RIM.TO -- have also been mentioned as potential suitors.

But speculation has started to favor overseas concerns that
can use broad manufacturing capabilities to boost the supply of
Palm-branded phones, at lower costs, as well as help bankroll
the advertising and promotion of new products.

"I think its someone who is on the outside looking in to
the U.S. smartphone market -- someone who wants to participate
but isn't there currently -- a Huaweh or a Lenovo," said Avian
Securities analyst Matthew Thornton. "It's those types that
would be the best fit."

Despite its challenges, Palm is the No. 3 brand in the
biggest growth sector of the mobile phone market, trailing
Apple Inc (AAPL.O) and RIM. In the United States, smartphones
represented about one-third of new handset volume in the fourth
quarter of 2009, according to NPD Group.

And smartphone sales are expected to rise about 38 percent
to 65 million units in the United States and Canada this year,
according to research firm Canalys.

HUAWEI, ZTE, LENOVO

Both Huawei, the world's No. 2 telecommunications equipment
maker, and Lenovo Group Ltd (0992.HK), a top PC marker that is
reportedly looking to bolster its mobile Internet business,
could infuse much-needed cash into Palm.

"They can capture the Palm brand, their carrier
relationships, (and) the patent portfolio," he added. "For
anyone that is starting from scratch in the U.S., this deal
makes some sense."

HTC Corp (2498.TW), the No.5 smartphone maker, has also
talked to Palm about a possible acquisition, Taiwan's Economic
Daily News said last week. Analysts view ZTE Corp (0763.HK)
000063.SZ, China's No. 2 telecommunications equipment maker,
as another possible suitor. ZTE could not be reached for
comment on Tuesday.

"Huawei and ZTE are potential buyers. It makes sense: they
don't have an operating system or a brand, but they have cheap
manufacturing costs and money to invest and develop the brand,"
said IDC analyst Francisco Jeronimo in London.

"Consumers don't associate Chinese brands with quality
products and don't pay a premium for such a mobile phone. Palm
would be perfect for them."

Palm shares have jumped more than 55 percent in the past
week on speculation about a potential sale of the company.

But the stock fell 14.6 percent to close at $5.16 on
Tuesday after analysts suggested the rally made the company too
pricey.

"We remain concerned that it may be a 'take-under,' meaning
a price that is below its current share price," Kaufman Bros.
analyst Shaw Wu said in a note.

"This is due to Palm's large operating losses and
likelihood that operating expenses remain high due to
investment required to stay competitive in the smartphone
space."

Based on recent deals in the technology sector, Palm could
potentially fetch $1.3 billion, given its current $1 billion
market capitalization and the 30 percent premium recently paid
in tech deals. Analysts, however, doubt bids will reach that
level.
(Additional reporting by Tarmo Virki in Helsinki; editing by
Paul Thomasch, Derek Caney editing by Andre Grenon)